Skip to content

    If you are looking to boost the value of your home, you may want to consider a cash out refinance loan. Here’s why.

    There are several upgrades you can make to your home that will increase its value. Some of the best upgrades you can make include adding a new bathroom, remodeling your kitchen, and adding a deck or patio.

    Making these upgrades to your home will not only increase its value, but they will also make your home more enjoyable to live in. If you are looking to make your home more valuable, a cash out refinance loan is a great way to get the money you need to make these upgrades.

    Isn’t a cash out refinance the same as a refinance?

    No. A cash out refinance is NOT a refinance and here is the key difference.

    It’s the amount borrowed.

    With a standard refinancing, your new mortgage will be for the same amount as your previous mortgage. Your mortgage rate may be the only difference. If your new mortgage rate is lower, you will save money on interest payments.

    With a cash-out refinancing, you increase your mortgage balance in addition to other possible adjustments such as your mortgage rate. Because you’re borrowing more money, your mortgage payments may be higher as well.

    How does a cash out refinance work?

    A cash-out refinancing allows you to borrow a significant sum of money at a low interest rate and with fewer monthly payments than other ways of borrowing. These are some advantages of a cash-out refinance:

    • Borrow Extra Funds

    Cash-out refinancing allows homeowners to borrow more money borrow a big sum of money all at once. Much more when compared to other choices, such as personal loans or credit lines, which often have smaller limitations.

    For a cash-out refinancing, the maximum loan-to-value (LTV) ratio is 80%. Assume your property is worth $500,000 and you have a mortgage of $300,000 now. This indicates your current LTV is 60% ($300,000 / $500,000). Homeowners can borrow up to an extra 20% of your home’s value, or $100,000, with a maximum LTV of 80%.

    You may refinance your mortgage for $400,000, pay off your current $300,000 mortgage, and remove $100,000 in cash.

    You may not be able to qualify for an 80% LTV based on your credit and income. If you have weak credit, your lender’s maximum allowable LTV may be lower.

    • Borrow at a Lower Rate of Interest than Personal Loans

    This type of loan often has a lower interest rate because you are borrowing money as a secured loan through your house. Personal loans, for example, are unsecured loans and have much higher interest rates.

    • Borrow with Lower Monthly Payments than Personal Loans

    Mortgages are amortized over a period of 25 years or longer. This means that your mortgage payments will be made over a long period of time. If you borrowed using a personal loan, for example, you would have to repay the amount in a shorter period, which would require larger loan payments.

    Which upgrades will add the most value to your home?

    The upgrades that will add the most value to your home will depend on the specific features of your home and the local market. However, some common upgrades that can add value to your home include updating the kitchen or bathroom, adding more living space, or improving energy efficiency.

    In the kitchen you may want to consider, adding a kitchen island. The ultimate cost varies depending on whether the island includes plumbing and electrical, but materials for an island should cost between $4,000 and $5,000, with labor costing between $3,500 and $5,000.

    Here’s a great breakdown of kitchen renovation costs from Forbes.

    How to get the best return for your renovation dollars.

    According to the 2022 Remodeling Impact Report, by the National Association of REALTORS® Research Group these are the renovations that produce the best return on investment.

    • Hardwood flooring refinish – 147%
    • New wood flooring – 118%
    • Insulation upgrade – 100%
    • Basement conversion to living area – 86%
    • Closet renovation – 83%
    • Attic conversion to living area – 75%
    • Complete kitchen renovation – 75%
    • Bathroom renovation – 71%
    • Kitchen upgrade – 67%
    • Add new bathroom – 63%
    • Add new primary bedroom suite – 56%

    How to get started with a cash out refinance loan.

    If you’re ready to access the equity in your home, getting a cash out refinance loan is relatively simple.

    An Embrace Home Loan® mortgage specialist can help find the loan that’s right for you and guide you through the entire process step-by-step. And because we do all our underwriting and processing in-house, we’re able to help get you the cash you need in days, not months.

    Call Embrace today at 800-333-3004 to speak with one of our knowledgeable loan officers and learn more about your refinance options. Or fill out our easy, convenient online application, and one of our specialists will contact you as soon as possible.

    Your mortgage options for a smooth journey home.

    Get expert guidance and personalized solutions for a stress-free mortgage experience.